Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements about our expectations related to the progress, continuation, timing and success of drug discovery and development activities conducted by Array and by our partners, our ability to obtain additional capital to fund our operations, changes in our research and development spending, realizing new revenue streams and obtaining future out-licensing partnership or collaboration agreements that include up-front, milestone and/or royalty payments, our ability to realize up-front milestone and royalty payments under our existing or any future agreements, future research and development spending and projections relating to the level of cash we expect to use in operations, our working capital requirements and our future headcount requirements. In some cases, forward-looking statements can be identified by the use of terms such as "may," "will," "expects," "intends," "plans," "anticipates," "estimates," "potential," or "continue," or the negative thereof or other comparable terms. These statements are based on current expectations, projections and assumptions made by management and are not guarantees of future performance. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition, as well as any forward-looking statements are subject to significant risks and uncertainties, including but not limited to the factors set forth under the heading "Risk Factors" in Item 1A. under Part II of this Quarterly Report and under Item 1A. of our Annual Report on Form 10-K for the fiscal year ended
June 30, 2013, and in other reports we file with the SEC. All forward-looking statements are made as of the date hereof and, unless required by law, we undertake no obligation to update any forward-looking statements. The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, our audited financial statements and related notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013, and with the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013. The terms "we," "us," "our," "the Company," or "Array" refer to Array BioPharma Inc.
Array is a biopharmaceutical company focused on the discovery, development and commercialization of targeted small molecule drugs to treat patients afflicted with cancer. Seven Phase 3 or pivotal studies are already in progress, or are planned to begin, within the next year. These programs include the wholly-owned hematology drug, filanesib (ARRY-520) for multiple myeloma, and two partnered cancer drugs, selumetinib, partnered with AstraZeneca, and binimetinib (MEK162), partnered with Novartis.
Our most advanced wholly-owned clinical stage drugs include:
Proprietary Program Indication Clinical Status 1. ARRY-520 KSP inhibitor for multiple myeloma, or MM Phase 2 2. ARRY-614 p38/Tie2 dual inhibitor for myelodysplastic Phase 1 syndromes, or MDS 3. ARRY-797 p38 inhibitor for LMNA-related dilated Phase 2 cardiomyopathy 4. ARRY-502 CRTh2 antagonist for asthma Phase 2 With our progress on ARRY-520 for MM and ARRY-614 for MDS, we believe hematology/oncology is the area of greatest opportunity for Array and where we intend to concentrate our resources and build on our capabilities in fiscal 2014 and beyond. In addition, we are taking the opportunity to initiate a small Phase 2 trial with ARRY-797 in a rare cardiovascular disease, based on scientific rationale, in vivo data and anecdotal clinical information. We are seeking a partner to advance our asthma program. 22
Table of Contents
In addition, we have 10 ongoing partner-funded clinical programs, including two MEK inhibitors, both in Phase 3 clinical trials, binimetinib with Novartis and selumetinib with AstraZeneca: Drug Candidate Indication Partner Clinical Status 1. Binimetinib MEK inhibitor for cancer Novartis Phase 3 International Pharmaceutical Ltd. 2. Selumetinib MEK inhibitor for cancer AstraZeneca, PLC Phase 3 3. Danoprevir Hepatitis C virus InterMune (danoprevir Phase 2 protease inhibitor now owned by Roche Holding AG) 4. ARRY-543/ASLAN001 HER2 / EGFR inhibitor ASLAN Pharmaceuticals Phase 2 for gastric cancer Pte Ltd. 5. GDC-0068 AKT inhibitor for cancer Genentech, Inc. Phase 2 6. LY2606368 Chk-1 inhibitor for Eli Lilly and Company Phase 2 cancer 7. VTX-2337 Toll-like receptor for VentiRx Phase 2 cancer Pharmaceuticals, Inc. 8. GDC-0575 Chk-1 inhibitor for Genentech, Inc. Phase 1b cancer 9. ARRY-380/ONT-380 HER2 inhibitor for Oncothyreon Inc. Phase 1b breast cancer 10. GDC-0994 Undisclosed cancer Genentech, Inc. Phase 1 target We also have a portfolio of proprietary and partnered preclinical drug discovery programs, including inhibitors that target Trk receptors for the treatment of pain and other indications. In
July 2013, we partnered with Loxo Oncology, Inc., a newly-formed, venture backed company, for continued development of certain preclinical compounds invented by Array in the field of oncology that Loxo has the exclusive right to develop in clinical trials and to commercialize. Also in July 2013, we partnered with Celgene to discover and develop drugs targeting a novel inflammation pathway. We may out-license other select promising candidates through research partnerships in the future. We have received a total of $623.5 millionin research funding and in up-front and milestone payments from our partnerships and collaborations from inception through December 31, 2013, including $154 millionin initial payments from strategic agreements with Amgen, Celgene, Genentech, Novartis and Oncothyreon that we entered into over the last four years. Our existing partnered programs entitle Array to receive a total of approximately $2.5 billionin additional milestone payments if we or our partners achieve the drug discovery, development and commercialization objectives detailed in those agreements. We also have the potential to earn royalties on any resulting product sales or share in the proceeds from licensing or commercialization from 11 partnered programs. Fiscal Periods Our fiscal year ends on June 30. When we refer to a fiscal year or quarter, we are referring to the year in which the fiscal year ends and the quarters during that fiscal year. Therefore, fiscal 2014 refers to the fiscal year ending June 30, 2014, and the second or current quarter refers to the quarter ended December 31, 2013.
Business Development and Partner Concentrations
We currently license or partner certain of our compounds and/or programs and enter into partnerships directly with pharmaceutical and biotechnology companies through opportunities identified by our business development group, senior management, scientists and customer referrals. In general, our partners may terminate their collaboration or license agreements with 60 to 180 days' prior notice. Specifics regarding termination provisions by agreement can be found in Note 4 - Collaboration and License Agreements to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Additional information related to the concentration of revenue among our partners is reported in Note 1 - Overview and Basis of Presentation - Concentration of Business Risks to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Table of Contents
All of our partnership and collaboration agreements are denominated in U.S. dollars.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of operations are based upon our accompanying financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. These estimates are the basis for our judgments about the carrying values of assets and liabilities, which in turn may impact our reported revenue and expenses. Our actual results could differ significantly from these estimates under different assumptions or conditions. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur periodically, could materially change the financial statements. Our critical accounting policies and estimates are described in Note 1 - Overview and Basis of Presentation to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.
August 2013, we completed a reduction in force of approximately 50 employees, mainly in our drug discovery organization. After the 20% reduction, we have approximately 200 employees whose capabilities are more tightly aligned with our strategy to fund our discovery organization with strategic collaborations and focusing development and commercialization resources on our hematology/oncology programs. See Note 7 - Restructuring Charges to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Results of Operations
License and Milestone Revenue
License and milestone revenue consists of up-front license fees and ongoing milestone payments from partners and collaborators.
Below is a summary of our license and milestone revenue (dollars in thousands): Three Months Ended Change Six Months Ended Change December 31, 2013 vs. 2012 December 31, 2013 vs. 2012 2013 2012 $ % 2013 2012 $ % License revenue
$ 3,037 $ 9,740 $ (6,703 )(69 )% $ 10,727 $ 19,073 $ (8,346 )(44 )% Milestone revenue 6,250 4,276 1,974 46 % 8,625 7,419 1,206 16 % Total license and milestone revenue $ 9,287 $ 14,016 $ (4,729 )(34 )% $ 19,352 $ 26,492 $ (7,140 )(27 )% License revenue decreased during the three and six months ended December 31, 2013, from the same periods in the prior fiscal year. During the current fiscal periods, we did not recognize any license revenue from Amgen or Celgene compared with license revenue of $4.9 millionand $9.8 millionfrom Amgen for the three and six months ended December 31, 2012, respectively, and license revenue of $1.2 millionand $2.0 millionfrom Celgene for the three and six months ended December 31, 2012, respectively. We recognized all license revenue from both of these partners prior to the start of the current fiscal year and we will not receive further revenue as both the Amgen agreement and the 2007 Celgene agreement have been terminated. In addition, license revenue recognized under our Chk-1 License Agreement with Genentechdecreased by $559 thousandand $964 thousandbetween the current and prior three-month and six-month periods, respectively, because we increased 24
Table of Contents
the expected obligation period under the
Genentechcollaboration by an additional six months, resulting in adjustments to the amount of the remaining license revenue recognized each quarter. Partially offsetting the license revenue decreases during the current six-month period was the recognition of $4.5 millionin non-cash license revenue under our new collaboration with Loxo, representing the full estimated fair value of the preferred shares received as consideration for an exclusive license to our technology, as discussed under Note 4 - Collaboration and License Agreements - Loxo Oncology, Inc.to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q. Milestone revenue increased during the three and six months ended December 31, 2013, when compared with the prior periods. Milestones earned during the current fiscal periods, including $5 millionearned from AstraZeneca in October 2013and $1 millionearned from Genentechduring the first quarter of fiscal 2014, as well as increased Novartis milestone revenue of $313 thousandand $625 thousandduring the three and six months ended December 31, 2013, respectively, contributed to the increases. Partially offsetting the above were decreases in milestone revenue from other partners such as Celgene, which decreased $1.3 millionand $2.5 millionduring the three and six months ended December 31, 2013, respectively, and Amgen, which decreased $581 thousandand $1.3 millionduring the three and six months ended December 31, 2013, respectively. No Amgen or Celgene milestones were earned during the current periods presented, and we fully recognized all previous milestones earned from these partners prior to the start of the current fiscal year. Additionally, we earned a $1.5 millionmilestone from VentiRx in the second quarter of fiscal 2013, which was not repeated in the current three-month period.
Collaboration revenue consists of revenue for our performance of drug discovery and development activities in collaboration with partners, which include development of proprietary drug candidates we out-license, as well as screening, lead generation and lead optimization research, custom synthesis and process research and, to a small degree, the development and sale of chemical compounds.
Below is a summary of our collaboration revenue (dollars in thousands):
Three Months Ended Change Six Months Ended Change December 31, 2013 vs. 2012 December 31, 2013 vs. 2012 2013 2012 $ % 2013 2012 $ % Collaboration revenue
$ 4,779 $ 4,361 $ 41810
Collaboration revenue increased during the three and six months ended
December 31, 2013, as new collaborations with Loxo and Oncothyreon more than offset the decreases in revenue under our 2003 agreement with Genentechfollowing the conclusion of the research term in January 2013, and under our previous collaboration with DNA BioPharma, which concluded in February 2013. Additionally, collaboration revenue under our new July 2013agreement with Celgene was lower by $524 thousandduring the current three-month period than the collaboration revenue recognized during the same period of the prior year under the 2007 Celgene agreement. Our obligations under the 2007 Celgene agreement were completed during the fourth quarter of fiscal 2013.
Cost of Partnered Programs
Cost of partnered programs represents costs attributable to discovery and development including preclinical and clinical trials we may conduct for or with our partners and, to a small degree, the cost of chemical compounds sold from our inventory. These costs consist mainly of compensation, associated fringe benefits, share-based compensation, preclinical and clinical outsourcing costs and other partnership-related costs, including supplies, small tools, travel and meals, facilities, depreciation, recruiting and relocation costs and other direct and indirect chemical handling and laboratory support costs. 25
Table of Contents
Below is a summary of our cost of partnered programs (dollars in thousands):
Three Months Ended Change Six Months Ended Change December 31, 2013 vs. 2012 December 31, 2013 vs. 2012 2013 2012 $ % 2013 2012 $ % Cost of partnered programs
$ 13,110 $ 7,909 $ 5,20166 % $ 23,768 $ 14,448 $ 9,32065 % Cost of partnered programs as a percentage of total revenue 93 % 43 %
84 % 42 %
Cost of partnered programs increased during the three and six months ended
December 31, 2013, due to increasing costs to advance our MEK inhibitor through clinical trials under our co-development arrangement with Novartis, as well as our new collaborations with Loxo and Oncothyreon. Partially offsetting the increases were reduced costs under our 2003 agreement with Genentechfollowing the conclusion of the research term, as well as engaging fewer scientists in the current period under the new Celgene agreement compared to the previous Celgene agreement during the same period of 2012. Cost of partnered programs as a percentage of total revenue increased for the three and six months ended December 31, 2013, primarily because of the increased actual costs as noted above and the decreased license revenue recognized during the same periods.
Research and Development Expenses for Proprietary Programs
Our research and development expenses for proprietary programs include costs associated with our proprietary drug programs for scientific and clinical personnel, supplies, inventory, equipment, small tools, travel and meals, depreciation, consultants, sponsored research, allocated facility costs, costs related to preclinical and clinical trials and share-based compensation. We manage our proprietary programs based on scientific data and achievement of research plan goals. Our scientists record their time to specific projects when possible; however, many activities simultaneously benefit multiple projects and cannot be readily attributed to a specific project. Accordingly, the accurate assignment of time and costs to a specific project is difficult and may not give a true indication of the actual costs of a particular project. As a result, we do not report costs on a program basis. Below is a summary of our research and development expenses for proprietary programs by categories of costs for the periods presented (dollars in thousands): Three Months Ended Change Six Months Ended Change December 31, 2013 vs. 2012 December 31, 2013 vs. 2012 2013 2012 $ % 2013 2012 $ % Salaries, benefits and share-based compensation
$ 3,542 $ 5,215 $ (1,673 )(32 )% $ 9,300 $ 10,695 $ (1,395 )(13 )% Outsourced services and consulting 2,873 5,050 (2,177 ) (43 )% 5,396 9,194 (3,798 ) (41 )% Laboratory supplies 1,436 1,599 (163 ) (10 )% 2,888 3,286 (398 ) (12 )% Facilities and depreciation 1,360 1,704 (344 ) (20 )% 2,980 3,541 (561 ) (16 )% Other 276 373 (97 ) (26 )% 627 759 (132 ) (17 )% Total research and development expenses $ 9,487 $ 13,941 $ (4,454 )(32 )% $ 21,191 $ 27,475 $ (6,284 )(23 )% 26
Table of Contents
Research and development expenses for proprietary programs decreased during the three and six months ended
December 31, 2013. The decreases were primarily due to lower spending on our preclinical programs and shifting funding to our partnered programs, including Loxo and Oncothyreon. In addition, we largely completed the ARRY-502 Phase 2 asthma study prior to the start of the current fiscal year. Partially offsetting these decreases were higher costs to advance ARRY-520 in three ongoing clinical trials. During the six months ended December 31, 2013, we also incurred $2.2 millionof additional expenses for termination benefits related to our reduction in workforce in August 2013that are reflected in salaries, benefits and share-based compensation in the table above.
General and Administrative Expenses
General and administrative expenses consist mainly of compensation and associated fringe benefits not included in cost of partnered programs or research and development expenses for proprietary programs and include other management, business development, accounting, information technology and administration costs, including patent filing and prosecution, recruiting and relocation, consulting and professional services, travel and meals, sales commissions, facilities, depreciation and other office expenses.
Below is a summary of our general and administrative expenses (dollars in thousands):
Three Months Ended Change Six Months Ended Change December 31, 2013 vs. 2012 December 31, 2013 vs. 2012 2013 2012 $ % 2013 2012 $ % General and administrative expenses
$ 5,472 $ 4,610 $ 86219 % $ 10,651 $ 9,390 $ 1,26113 % General and administrative expenses increased during the three and six months ended December 31, 2013. Costs for general business consulting and commercialization, as well as higher share-based compensation expenses were the primary contributors to the increase in the current three and six-month periods. Additionally, during the current six-month period, we incurred $602 thousandfor severance costs related to the reduction in our workforce.
Other Income (Expense)
Below is a summary of our other income (expense) (dollars in thousands):
Three Months Ended Change Six Months Ended Change December 31, 2013 vs. 2012 December 31, 2013 vs. 2012 2013 2012 $ % 2013 2012 $ % Interest income
$ 23 $ 12 $ 1192 % $ 39 $ 24 $ 1563 % Interest expense (2,428 ) (2,860 ) 432 15 % (4,811 ) (5,619 ) 808 14 % Total other expense, net $ (2,405 ) $ (2,848 ) $ 44316 % $ (4,772 ) $ (5,595 ) $ 82315 % 27
Table of Contents
The following table shows the details of our interest expense for all of our debt arrangements outstanding during the periods presented, including actual interest paid, amortization of debt and loan transaction fees, and losses on early prepayment that were charged to interest expense (in thousands): Three Months Ended Six Months Ended December 31, December 31, 2013 2012 2013 2012 Comerica Term Loan Simple interest
$ 120 $ 123 $ 241 $ 244Amortization of fees paid for letters of credit 9 27 29 54 Total interest expense on the Comerica term loan 129 150 270 298 Convertible Senior Notes Contractual interest 1,003 - 1,995 - Amortization of debt discount 1,227 - 2,410 - Amortization of debt issuance costs 69 - 136 - Total interest expense on the convertible senior notes 2,299 - 4,541 - Deerfield Credit Facilities Simple interest - 1,609 - 3,217 Amortization of debt discounts and transaction fees - 1,149 - 2,281 Change in fair value of the embedded derivatives - (48 ) - (177 ) Total interest expense on the Deerfield credit facilities - 2,710 - 5,321 Total interest expense $ 2,428 $ 2,860 $ 4,811 $ 5,619During the three and six months ended December 31, 2013, interest expense was lower due to the lower coupon rate on our convertible senior notes as compared to the interest rate on our term loan with Deerfield Capital, which was repaid in June 2013when the convertible senior notes were issued.
Liquidity and Capital Resources
We have incurred operating losses and an accumulated deficit as a result of ongoing research and development spending since inception. As of
December 31, 2013, we had an accumulated deficit of $664.8 million. We had net losses of $16.4 millionand $32.1 millionfor the three and six months ended December 31, 2013, respectively, and net losses of $61.9 million, $23.6 millionand $56.3 millionfor the fiscal years ended June 30, 2013, 2012 and 2011, respectively. For the six months ended December 31, 2013, our net cash used in operations was $34.3 million. We have historically funded our operations from up-front fees and license and milestone payments received under our drug partnerships, the sale of equity securities, and debt provided by credit facilities and our recent convertible debt offering. We received net proceeds of approximately $128 millionin June 2013from an underwritten public offering of convertible debt and $127 millionduring calendar year 2012 from two underwritten public offerings of our common stock. Additionally we have received $208.5 millionfrom up-front fees and license and milestone payments under our partnerships since December 2009, including the following payments: • In December 2009, we received a $60 millionup-front payment from Amgen under a Collaboration and License Agreement.
• During May and
and milestone payments under a License Agreement with Novartis.
Discovery and Development Agreement with Celgene.
Agreement with Novartis.
Discovery Collaboration Agreement with
Table of Contents
June 2012, we received an $8.5 millionmilestone payment from Amgen under a Collaboration and License Agreement. • In June 2013, we received a $10 millionup-front payment under a Development and Commercialization Agreement with Oncothyreon. • In July 2013, we received an $11 millionup-front payment under a Drug Discovery and Development Option and License Agreement with Celgene.
Agreement with Novartis. • In
November 2013, we received a $5 millionmilestone payment under a Collaboration and License Agreement with AstraZeneca. We paid $9.2 millionand $11.3 millionto Novartis during the second quarter of fiscal 2013 and October 2013, respectively, to begin paying our share of the combined development costs incurred since commencement of our agreement with Novartis for development of the binimetinib program, as discussed in Note 4 - Collaboration and License Agreements - Novartis International Pharmaceutical Ltd.to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q. During fiscal 2013, we committed to continue our co-development contribution through fiscal 2014. We have the right to opt out of paying our co-development contribution on an annual basis. In our accompanying balance sheets, we have $6.7 millionrecorded as co-development liability for this obligation at December 31, 2013, compared with $11.0 millionrecorded at June 30, 2013. Management believes that our cash, cash equivalents and marketable securities as of December 31, 2013will enable us to continue to fund operations in the normal course of business for at least the next 12 months. Until we can generate sufficient levels of cash from current operations, which we do not expect to achieve in the foreseeable future, and because sufficient funds may not be available to us when needed from existing partnerships, we expect that we will be required to continue to fund our operations in part through the sale of debt or equity securities and through licensing select programs that include up-front and/or milestone payments. Additionally, on August 5, 2013, we implemented a 20% reduction in our workforce. Our estimates indicate that we will save approximately $3 millionper quarter from this reduction, not including the one-time restructuring charge of $2.8 millionthat we incurred during the first quarter of fiscal 2014. See Note 7 - Restructuring Charges to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q above for further discussion. Our ability to successfully raise sufficient funds through the sale of debt or equity securities or from debt financing from lenders when needed is subject to many risks and uncertainties and, even if we are successful, future equity issuances would result in dilution to our existing stockholders. We also may not successfully consummate new partnerships that provide for up-front fees or milestone payments, or we may not earn milestone payments under such partnerships when anticipated, or at all. Our ability to realize milestone or royalty payments under existing partnership agreements and to enter into new partnering arrangements that generate additional revenue through up-front fees and milestone or royalty payments is subject to a number of risks, many of which are beyond our control. Our risk factors are described under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013, and in other reports we file with the SEC. Our assessment of our future need for funding and our ability to continue to fund our operations is a forward-looking statement that is based on assumptions that may prove to be wrong and that involve substantial risks and uncertainties. Our actual future capital requirements could vary as a result of a number of factors. Please refer to our risk factors under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2013, and in other reports we file with the SEC. If we are unable to generate enough revenue from our existing or new partnerships when needed or secure additional sources of funding, it may be necessary to significantly reduce our current rate of spending through further reductions in staff and delaying, scaling back or stopping certain research and development programs, including more costly Phase 2 and Phase 3 clinical trials on our wholly-owned or co-development programs as these programs progress into later stage development. Insufficient liquidity may also require us to relinquish greater rights to product candidates at an earlier stage of development or on less favorable terms to us and our stockholders than we would otherwise choose in order to obtain up-front license fees needed to fund operations. These events could prevent us from successfully executing our operating plan and, in the future, could raise 29
Table of Contents
substantial doubt about our ability to continue as a going concern. Further, as discussed in Note 5 - Long-term Debt to our unaudited financial statements included elsewhere in this Quarterly Report on Form 10-Q, if at any time our balance of total cash, cash equivalents and marketable securities at
Comerica Bankand approved outside accounts falls below $22 million, we must maintain a balance of cash, cash equivalents and marketable securities at Comerica at least equivalent to the entire outstanding debt balance with Comerica, which is currently $14.6 million. We must also maintain a monthly liquidity ratio if we draw down on the revolving line of credit.
Cash equivalents are short-term, highly-liquid financial instruments that are readily convertible to cash and have maturities of 90 days or less from the date of purchase. Short-term marketable securities consist primarily of U.S. government agency obligations with maturities of greater than 90 days when purchased. Long-term marketable securities are primarily securities held under our deferred compensation plan. Below is a summary of our cash, cash equivalents and marketable securities (in thousands): December 31, 2013 June 30, 2013 $ Change Cash and cash equivalents $ 47,194
$ 60,736 $ (13,542 )Marketable securities - short-term 72,481 47,505
Marketable securities - long-term 691 465 226 Total $ 120,366
$ 108,706 $ 11,660Cash Flow Activities
Below is a summary of our cash flow activities (in thousands):
Six Months Ended December 31, 2013 2012 $ Change Cash flows provided by (used in): Operating activities
$ (34,315 ) $ (50,763 ) $ 16,448Investing activities (25,808 ) (17,836 ) (7,972 ) Financing activities 46,581 72,365 (25,784 ) Total $ (13,542 ) $ 3,766 $ (17,308 )Net cash used in operating activities improved by $16.4 millionduring the six months ended December 31, 2013. The change was primarily due to the receipt of an $11 millionup-front payment from Celgene in July 2013, as well the receipt of $5 millionfrom Novartis in August 2013for the milestone earned at the end of fiscal 2013 and a total of $6 millionof additional milestone revenue received during the current six-month period from AstraZeneca and Genentech. We received $1.8 millionof comparable milestone payments during the first six months of fiscal 2013. We used an additional $8.7 millionof cash during the six months ended December 31, 2013, related to our net investment activity in marketable securities. We purchased a greater amount of investments and sold less in the current period as compared to the prior year. In both periods, we purchased investments utilizing capital raised through the sale of our common stock, which came from our sales agreement with Cantor Fitzgeraldduring the current fiscal year and from a public offering of our common shares during the second quarter of fiscal 2013. Offsetting the increased investment in marketable securities was a decrease in our capital expenditures of $739 thousandin the current six-month period compared with the same period of the prior year. Net cash provided by financing activities decreased $25.8 million. The decrease relates primarily to $30.8 millionless in cash proceeds received from sales of our common stock during the current year under the Cantor Fitzgeraldsales agreement, as compared to proceeds received from our offering of our common stock in the same period of the prior year. 30
Table of Contents